Default Risk in Equity Returns | A Study on Augmentation of the Three-Factor Model of Fama and French with Default Risk Factor

Olena Martynenko (u. a.)

ISBN 10: 3846517755 / ISBN 13: 9783846517758

Published by LAP LAMBERT Academic Publishing, 2011

Default Risk in Equity Returns | A Study on Augmentation of the Three-Factor Model of Fama and French with Default Risk Factor | Olena Martynenko (u. a.) | Taschenbuch | 96 S. | Englisch | 2011 | LAP LAMBERT Academic Publishing | EAN 9783846517758 | Verantwortliche Person für die EU: preigu GmbH & Co. KG, Lengericher Landstr. 19, 49078 Osnabrück, mail[at]preigu[dot]de | Anbieter: preigu. Seller Inventory # 106770703

Synopsis:

This study verifies quantitatively a systematic character of default risk and statistical quality of the competing three- and four-factor asset pricing models. The experimental design applied to this study is premised on the three-factor model of Fama and French enhanced by default risk factor. The study utilizes the factor mimicking portfolio technique for modeling the risks underlying size, value and default risk factors. Distance-to-default estimate, deduced from the option-based model, is adopted by this study as a proxy for default risk. The augmentation of the three-factor model with default risk factor improves the performance of a conventional asset pricing specification on average. The factor loadings of the portfolios of size, value and default risk factors exhibit properties of risk factor sensitivities for stocks. The size and value factors are found to be common in equity returns, but at the same time not being proxies for default related information.

About the Author: obtained a degree of Master of Politology in 2002 and a degree of Master of Science in Finance in 2010.

Bibliographic Details

Title: Default Risk in Equity Returns | A Study on ...
Publisher: LAP LAMBERT Academic Publishing
Publication Date: 2011
Binding: Taschenbuch
Condition: Neu